How The US Government Manipulates Inflation Data

phil's stock world

Phil’s Stock World

Courtesy of Phil of Phil’s Stock WorldThe PCE bothered me yesterday.

The Government told us that the PCE core price index for December was 0% – no inflation at all.  

I found that to be incredible – as in not credible at all and then Tusked asked me how long the Bern ank could keep justifying his rampant money printing with fake government data, to which I responded: “I had many derogatory things to say about that but I was literally so sickened by that BS that I couldn’t bring myself to comment on it so I just left it alone but it’s a very sad joke that our government can tell us that there was no inflation in December while the whole planet is falling apart, isn’t it?”  

Fortunately, there was a helpful article in the WSJ by Brett Arends that pointed out that the way the government justifies their low inflation figures is through “substitution and harmonics,” a topic expert Government BS detector, Barry Ritholtz had touched on as well.  As Barry says:

Harmonics asks the question: “How much of a product’s price increase is a function of “inflation,” and how much is quality improvement?” Thus, the entire late 1990’s concept of Hedonics is premised upon a flawed assumption: that quality is static.  Hedonics is a variation of the old trick of comparing the present with the past, instead of the present. Measuring quality improvements is a distraction from the real measure of inflation: the purchasing power of a dollar.

 Hedonics opens the door to producing magical results: a lower inflation rate with generally rising prices, a higher growth rate although the economy may be weaker, and a higher productivity number, although productivity would have been declining without the Donica imputations.

What BS, right?  Well, when I get mad, I do research and when my research uncovers something – I make an electronic puppet show

Forward this to your friends and Congresspeople – let’s try to get our government to get real!  

Chart by Shadowstats.com 

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